ecdub
New Member
Posts: 5
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Post by ecdub on Jan 28, 2015 10:19:33 GMT
Hi all,
I have been following some Funding Knight actions recently, and noticed that the loan goes almost without expection at the reserve rate (or 0.01-0.02% below it).
My question therefore is... is the reserve rate set perfectly in accordance with risk... or do most lenders not really have a view on risk / interest rate, and so just bid at the reserve..?
You feel that if the reserve rate on an auction was 0.5% lower or higher it would almost certainly fill at that rate.
Anyone with any thoughts on this?
Many thanks
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Post by jackpease on Jan 28, 2015 10:41:29 GMT
I don't fully understand the reserve rate but i have noticed that nearly all recent auctions end up at low interest rates - eg the bridging loan <9% which is low given this is new territory for FK. Not sure why FK auctions seem to go down far lower than FC auctions - is it that deal flow is less and investors are quick to mop anything up?
I'm certainly being squeezed out of the current ones by very large bidders!
Jack P
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ecdub
New Member
Posts: 5
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Post by ecdub on Jan 28, 2015 10:45:41 GMT
The bridging loan is at 9% though because that is the reserve? People have just piled in at that rate, anyone chancing their arm above that rate is likely to miss out. If FK set the reserve (assuming they set it...? at 10%, that is the level it would go at, as people seem to just follow that without thought.
Unless I am missing something..
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min
Member of DD Central
Posts: 602
Likes: 169
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Post by min on Jan 28, 2015 12:48:00 GMT
Given that loans are taken immediately on FK, I assume there is a contract that says borrower has to accept immediately if reserve rate is met. In some ways much better than on Fancy Claptrap where money can be tied up for a week and then loan not taken up.
I think if there were more loans on FK then we might see auctions not reaching reserve and then it would be interesting to see if loan was taken up.
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Post by mrclondon on Jan 28, 2015 21:57:23 GMT
Bear in mind that institutional funds make up a significant proportion of the bids on each loan, and that these bids are almost always at the reserve rate. There is in practise very little scope to better the reserve rate, and apart from on the smallest of loans bidding at 0.01% below the reserve rate will almost always secure a slice of the action. My perception is that the amount of institutional funds bid on a given loan is the amount judged sufficient such the loan will close with most if not all bids above the reserve rate eliminated.
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Post by captainconfident on Jan 29, 2015 0:00:49 GMT
Quite. You don't have to think so much on FK, either you want in at that rate or you don't. I have abandoned Flying Caucers as its a waste of time shovelling money at loans in the hope that some of it sticks. Seemed like fun at the beginning but now I can't even summon up the enthusiasm to type the answer to the security question.
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